As Online News Act Teeters on Total Failure, Canadian Government Unveils Massive Media Bailout

With the Online News Act all but a total policy failure, the government has opted to bail out the media to the tune of 35% of costs.

No one wants to watch or read traditional media any more. With well funded insightful news rooms being replaced by completely underfunded news rooms churning out the laziest of reports, it’s probably little wonder why audiences are turning to other sources to either be informed or entertained. The fact that venture capital swooped in, bought countless news organizations, plundered the fortunes of the once vibrant traditional media landscape and strip mined the chances of the companies even having a future really only ended up being one of the major factors to the plight of news rooms today.

Business to business relationships also suffered. Supermarkets ditched coupons in newspapers in favour of rewards programs. Flyer distributions moved to the Canadian postal system as subscription rates dwindled. Audiences increasingly saw the prices go up while the product quality continued to dwindle. People found it to be more effective to advertise on online sources rather than pay hefty fees for classifieds with increasingly limited reach. Even worse, media executives dismissed the new opportunities afforded by the internet as little more than a fad that would just go away on its own. As such, innovating was about the last thing on their minds, sealing the traditional media’s fate in all of this.

Now that bankruptcies and closures have swept across the media landscape – especially in smaller rural areas with smaller distributions – the media needed to find a convenient scapegoat. That convenient scapegoat was “Big Tech”. The misfortunes of the media was no longer the result of garbage journalism, out of control consolidation, lack of innovation, and poor business decision making. No, that’s all going to get conveniently forgotten! No, it was clearly all Google’s fault… and Facebook… can we add Facebook into the mix? Sure! It’s all Google and Facebooks fault! Sure, there’s no evidence of this, but don’t worry, we’ll make something up. Maybe cherry pick some numbers and fudge the numbers a little to sell a story for our convenience.

Thus, Bill C-18, now the Online News Act was born. Canada’s link tax, naturally, wasn’t well received by experts and people who have a semblance of knowledge on how the internet works in real life. However, those criticisms were ignored as the legislation was rammed through the process despite the criticisms. In the process, people were rightfully predicting that the platforms would rather drop news links rather than pay hundreds of millions of dollars for what amounted to no real reason. Platforms, after all, do not depend on news links and found time and time again that if news links were to disappear tomorrow, they wouldn’t really notice the difference. Predictably, those ramming the law through called these accurate predictions a “bluff”.

After the law passed, Facebook began blocking news links starting on August 1st. Supporters of the new law insisted that Facebook would cave within a week because without news links, users would completely leave the platform and Facebook would go bankrupt within weeks (LOL!). To the surprise of no one, engagement with media pages collapsed and Facebooks traffic remained unchanged. Meta’s revenues then proceeded to continue to rise while newspapers began shutting down. What’s more, the news link block remains in place. Gee, I wonder why???

In June, Google announced that it would be dropping news links. In October, Google said that this position has remained unchanged. Earlier this month, Prime Minister, Justin Trudeau conducted an interview and didn’t say if the situation has really changed since. Supporters of the law just settled for going into complete denial that this was really happening (it is).

While Google hasn’t yet followed through on their position, instead, continuing to engage with the Canadian government, the seeming deadline to act is fast approaching. December 19th is less than a month away and all indications suggest that we are no closer to finding a way forward to keep Google on board with the Online News Act (there probably isn’t a path forward). Unless there is a dramatic change (which traditional media has been repeatedly disappointed in despite their enthusiasm to the contrary), then chances are, Google pulls out and the media landscape in Canada will face catastrophe – and the blame lies squarely at the feet of the Canadian government (and those who pushed for this law) for it.

So, what is the backup plan? For the longest time, the Canadian government seemingly didn’t have one. Despite all the warnings and data, the Canadian government continued to believe – even after Facebook pulled the plug – that their Online News Act was fool proof. In their minds, there was no way that their obviously poorly conceived idea could possibly fail (even as it was failing). As far back as late June, however, the Canadian government openly floated the idea of bailing out the media. Media bailouts are nothing new in this country, but the situation they brought onto themselves was. Whatever money was lost for driving the platforms away, the Canadian government would step in and foot the extra costs.

Obviously, the government basically paying for the costs of journalism is controversial. It goes without saying that the media’s job is technically holding the government to account. How easy do you think that will be when the government is also giving you your paycheck? Not easy at all. No matter how much media players like to puff out their rooster chests and claim they are independent from any influence (LOL!), money talks. Want to motivate someone to do something? Threaten to take away that persons revenue stream. That is the power the Canadian government would end up having over the media. So, you can understand why people like me have no problem saying that the bailouts isn’t exactly going to save journalism.

The thing is, as time goes on, the outcome of the Online News Act only becomes more and more apparent. The government really only has two options at that point: rescind the law or permanently bailout specific hand-picked players. Well, the Canadian government is too egotistical with the former logical option, so they are only left with the highly problematic latter option. Now, we are learning that the Canadian government has basically formalized their plan to bail out the media sector. From Michael Geist:

The government has taken the first step to creating a bailout for its disastrous Bill C-18 by agreeing to News Media Canada demands to increase the support under the Labour Journalism Tax Credit. While the current system covers 25% of the journalist costs up to $55,000 per employee (or $13,750), the government’s fall economic statement increases both the percentage covered and cap per employee. Under the new system, which is retroactive to the start of this year, Qualified Canadian Journalism Organizations (which covers print and digital but not broadcasters) can now claim 35% of the costs of journalist expenditures up to $85,000 per employee. The increases the support to up to $29,750 per employee or an increase of 116%. This new support will run for four years at a cost of $129 million ($60 million this year alone).

Despite the huge increase and the growing dependence on government support for the news sector, this bailout should not come as a total surprise. Notwithstanding the tough talk, Bill C-18 has been an obvious and unmitigated disaster, resulting in lost traffic and revenues for Canadian news outlets who did not take the prospect of blocked news links on Facebook and Instagram seriously. If blocked news links extends to Google – a decision will presumably be forthcoming in the next month – the effect will be catastrophic to the Canadian media sector. News Media Canada, which was the lead lobbyist for Bill C-18, became the lead lobbyist for a bailout this past summer. As I wrote back in September, the organization was demanding – wait for it – an increase to 35% of costs at $85,000 per employee. In other words, the government gave the lead news media lobbyist in Canada precisely what it demanded.

This is basically the very definition of the Canadian government picking winners and losers. With no ability for the media to reach an audience – and getting cut off from potential revenue streams for the most part – the only reliable revenue will wind up from the Canadian government. The Canadian government then picks who does and doesn’t get the money – and the ability to survive for that matter. If things go from catastrophic to apocalyptic with the Conservative party headed up by Pierre Poilievre getting elected, you know that any news outlet that ever gave him negative publicity will face the prospect of a Prime Minister saying, “Nice revenue stream you got there. Would be a shame if something were to, eh, happen to it.”

Compounding things is the fact that large media companies already have quite the cozy relationship with the Canadian government. Some get preferential access while others are often kicked out of press pools. Unless the outlet is basically funded by a multimillionaire or a billionaire, the chances that a small independent outlet surviving gets massively reduced.

Geist would also echo my sentiments about the situation, rightfully pointing out that all of this puts into serious question the true independence of the press. On that point, we completely agree on that front for sure.

All this does leave an interesting question in the air: is the Canadian government starting to realize the inevitable outcome of the Online News Act? They have not made any announcement about any progress in talks with Google. There’s no mysterious “leak” to the press about any potential breakthrough or signs of progress either. Trudeau himself didn’t mention anything about the prospects of getting an agreement with Google. Now, we are seeing the unveiling of massive media bailouts, seemingly as way of mitigating the imminent consequences of the Online News Act. As far as I’m concerned, the long shot that Google will cave in all of this is becoming increasingly distant.

Drew Wilson on Twitter: @icecube85 and Facebook.

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